Sucharita Kodali, vice president and principal analyst for Forrester, keeps a close eye on ecommerce forecasting and trends, digital retail and supply chain. Before joining Forrester, she was director of marketing at Saks Fifth Avenue and held management positions at Toys R Us and Walt Disney Company. NRF spoke with Kodali about the impact of the COVID-19 pandemic on the retail supply chain.
In what ways have supply chains risen to the challenge during the pandemic, especially in terms of balancing safety with keeping product moving?
The grocery supply chain is probably the best example. The good news is that there is no real evidence of transmission via packages, so the more effective efforts are likely in ensuring that workers are safe and that they continue to show up because otherwise we would have delays.
Companies that do need support in warehouses or in transportation have been scooping up many displaced employees and paying premiums for them which has also likely kept things running smoothly, though I suspect it will eat into earnings when earnings are released.
What vulnerabilities have been revealed?
Early on, we realized that we were too dependent on China and that likely will lead to a reevaluation of supply chains in the future. The truth is that companies chose China deliberately — it was never fast, but it was cheap.
Maybe we will have government-subsidized factories in the U.S. to support some core product manufacturing here, similar to subsidies of things like agricultural products. We now have a case that more domestic supply can protect us as a matter of national security.
Worker safety has also been a persistent problem.
What lessons are being learned now that might impact the way supply chains operate in the future?
I think risk-based scenario planning will be something we’ll see much more of in the future. Supply chain diversification will be a big outcome of that or, if not, cash reserves to offset changing things quickly.
As far as domestic supply chain issues, it appears that the biggest challenge has been worker safety. There will likely be some laws put into effect to protect workers in some states, though the truth is the likelihood of another pandemic of this magnitude probably isn’t that large. This has been a bizarre disease that was met with the worst confluence of reactions possible.
These Level 4 infections get flagged very early to the WHO. Next time something like this happens, the reaction will be like the shoe bomber — overreact early to stamp it out. That said, the prep with respect to supply chains will help all manner of future disruption: climate change, natural disasters, IT failures, tariffs, etc.